Feb 16, 2008 2:45 pm US/Central
Wheat Prices Rise, As Fear Of Shortage Looms
MINNEAPOLIS (AP) ―
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For the past month, the Minneapolis Grain Exchange, the nation's center for trading spring wheat futures, has been one hot market.
AP
Spring wheat prices have been on the rise all winter -- smashing previous records.
At the Minneapolis Grain Exchange, trading Friday was at a high of $19.80 a bushel -- nearly triple the record from 1996. Friday's trading closed at $19.35 a bushel, up 82 cents.
For the past month, the Minneapolis Grain Exchange, the nation's center for trading spring wheat futures, has been one hot market.
Grain experts say the wild increases are due to a fear that grain supplies won't keep up with rising demand. Poor wheat crops worldwide have left wheat supplies at a 60-year low.
"This wheat market has given us a glimpse of the what-if -- what if we don't deliver the goods on the production side, because the demand is here," warned Ed Usset, a grain marketing specialist at the University of Minnesota.
Trading in Minneapolis has supercharged wheat markets in Chicago and Kansas City, Mo. And corn and soybean prices are also rising to near-record levels. The impact is fueling a wave of uncertainty about everything from food price inflation to possible hunger in the developing world.
"Minneapolis, that's where this is all coming from, the shortage of the actual physical supply of spring wheat and durum," said Elaine Kub, a commodity market analyst at DTN. She suspects grain prices elsewhere will retreat, but there's a huge clamor for spring wheat.
"People are desperate," Kub said. "You definitely heard stories from out in the country of elevators offering $20 a bushel and getting no sellers. ... You hear people tossing around the words 'wheat hoarding."'
For decades, the problem has been surplus, not scarcity, and horribly low prices. Farmers have complained, while consumers benefited from the abundance of grains and proteins.
This week's action in Minneapolis previews a different sort of marketplace.
"It's telling us how close we are to that tipping point in all commodities," said Usset. "Every commodity I know would like more acres: corn needs more, soybeans need more ... durum wheat, malt barley, sunflowers, they all want a little more production."
The Minneapolis Grain Exchange is scrambling to adjust to the wild rise. On Friday, the maximum daily trading limit rose to $1.35 a bushel -- compared with 30 cents last week -- and soon, the maximum daily limit will disappear.
Officials said they had to raise the daily trading limit because markets were so volatile that they locked up day after day, and nobody could trade wheat futures at all.
"Whenever you have set caps, even if they're for good intentions to help protect certain people from abnormal price swings, you're going to run into others who are affected because you have those price caps," said Layne Carlson, treasurer of the Minneapolis Grain Exchange.
Because of the higher limits, the March wheat contract did not close at the maximum trading limit Friday. The return of regular trading to the wheat pit may signal an end to the greatest run-up in wheat history, with wheat prices rising fourfold in a single year.
For farmers, that puts the 2008 Minneapolis wheat market atop the list of legendary bull markets.
"Absolutely, this is one for the record books, make no mistake about it," Usset said. "This will be talked about."
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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